Friday, September 11, 2009

Doing Business 2010: India’s Performance

Doing Business 2010, a co-publication of the World Bank and the International Finance Corporation has bee released. Compared to India’s ranking of 132nd last year, it has dropped one notch to 133 this year. It has been noted that despite reforms during this period, India has been outperformed by other similarly-situated economies during the period.

One area where India has scored marginally higher on this occasion is the parameter relating to ease of closure of businesses. The Report notes: “In India procedures under the 2002 Securitization Act have become more effective, easing the process and reducing the time required to close a business.” The author of the report states:

According to Khalifa, one indicator where India made progress last year was in improving procedures involved in closing a business. Here, India’s ranking improved four places to 138.

India strengthened the process flowing out of the 2002 Securitization Act, which helped the country improve its ranking in closing businesses. Quickening insolvency process frees up assets for use by others, Khalifa said. Last year, India increased the number of judges handling solvency cases by one-third and streamlined processes to file for bankruptcy, she added.
At the same time, it is necessary to note that the Securitization Act is a recovery legislation with limited application (and that too to the benefit of specific types of banks and financial institutions) and it may be a stretch to treat that as a substitute for a strong bankruptcy code that India continues to lack.

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